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China’s Automotive Market Rebound Bodes Well for Nio

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Just recently, Chinese electric vehicle (EV) maker Nio (NYSE:NIO) released monthly and quarterly delivery results that were outstanding. That’s bullish for NIO stock, and so is favorable data concerning retail automobile sales in China.

Nio’s comeback story has had several chapters — some exciting, others disappointing. The company rose up from the depths of despair in early 2020, rewarding shareholders with astonishing gains. The past year and a half, however, have been less than stellar for Nio’s loyal investors.

This doesn’t mean that Nio isn’t doing well as a company, though. Yes, there’s a short report that must be addressed or at least acknowledged. However, Nio’s investors don’t need to panic. As it turns out, the company’s recently issued results, along with some China-specific developments, strongly favor Nio now.

InvestorPlace - Stock Market News, Stock Advice & Trading Tips

NIO

Nio

$21.06

What’s Happening with NIO Stock?

There’s no denying that, with a 52-week high of $50.55, NIO stock has a lot of catching up to do. Not long ago, the stock was barely holding up above $20.

Should the shares be trading much higher? Short-report issuer than Grizzly Research doesn’t seem to think so, as the firm publicly declared that Nio is “Pulling Forward Revenue and Manipulating Costs to Boost Margins.”

Apparently, Grizzly Research is alleging that Nio inflated its revenue and net income, while also exposing Nio’s shareholders to a potential margin call. For a deeper dive into the allegations, please feel free to check out this concise account written by InvestorPlace’s Eddie Pan.

Will the allegations stick? It’s hard to know for sure, as Nio responded to Grizzly Research’s short report, claiming that it’s “without merit and contains numerous errors.” Only time will tell how this drama plays out and which firm will prevail in the court of public opinion.

Stay Encouraged, and Stay in the Trade

In the meantime, Nio’s investors can be encouraged by positive news regarding Chinese retail car sales. In particular, data from the China Passenger Car Association indicated that retail car sales in China increased 28% from June 20 to June 26, compared to the same period in May. This is happening despite on-and-off Covid-19 lockdowns in China.

This might have been an unexpected result during these challenging times. Yet, it may have been prompted by pent-up demand as Shanghai came out of Covid-19 lockdowns. In any event, it’s great news for Nio’s stakeholders.

Even better, Nio just released some highly encouraging delivery data. In June, the automaker delivered 12,961 vehicles, up 60.3% year-over-year. Not only that, but Nio delivered 25,059 vehicles during the three months ended June 2022, representing a 14.4% year-over-year increase. In other words, the results clearly indicate that Nio is in growth mode – as they say, the numbers don’t lie.

What You Can Do Now

Grizzly Research’s short report looks scary — there’s no denying it. However, there’s concrete data signaling growth for Nio in particular, and for China’s automotive market in general.

This is a lot of information for prospective investors to process. At the end of the day, though, you can choose to let the hard data guide your decisions. With that, and with some faith that China’s car market can continue to rebound, there’s a strong bullish argument in favor of NIO stock.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

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